Although mountains are rich in natural resources and provide vital ecosystem services to the global community, mountain people are marginalised. As the ecosystem services they provide are mostly free of charge, they have no incentive to invest in the conservation. We examine the feasibility of improving their livelihoods through the sale of water services to downstream communities. Using hydro-meteorological data, we assessed the effects of forest conservation on water yield and estimated the value of water services to downstream communities. Results show that if a system of payment for ecosystem services is established, mountain communities can improve their livelihoods by converting their farmland into conservation areas. However, it will take 15 years to increase the water yield, which means that external assistance is required in early years. Policy measures are suggested to establish a market for ecosystem services to encourage upstream communities to take conservation measures.